PGT Inc.'s business is rebounding along with U.S. housing markets

After roughly five years of economic doldrums, during which time homeowners shelved renovations and builders largely went into hibernation, window-and-door maker PGT Inc. is rebounding.

Though the company's impact-resistant doors and windows sold well enough -- even in the real estate bust from 2007 to 2010 -- to avoid expenses from outpacing sales, PGT is now experiencing renewed buyer interest in all its product lines.

While that represents good news for the company's investors, it also is a boon for the local economy, because PGT is one of the largest private employers in Southwest Florida.

In all, the Venice-based company now employs 1,100 locally -- 70 of whom have been added in 2013.

PGT may not be done, either. Company officials say the new-hire number could grow to 100 before long.

"We kind of went from a massive head-wind to, I won't say a tail-wind, but at least a little breeze at our backs," PGT CEO and co-founder Rod Hershberger said in a recent interview.

Perhaps not surprisingly, PGT revenue trends bear a strong resemblance to home prices in many markets nationwide.

At the end of 2007 -- the final year of a four-year residential boom throughout the U.S. -- company sales totaled $278 million.

By 2011, though, sales had fallen to $167 million, though last year overall they bumped up slightly, to $175 million.

That changed dramatically in the fourth quarter of last year -- coinciding with a resurgence in homebuilding throughout Florida and many markets nationwide.

At $45 million, PGT's sales were 26 percent higher than a year earlier, enough to turn a $3.2 million net profit versus a year earlier loss that was nearly double that size.

January sales, too, were 22 percent ahead of a year earlier.

On Feb. 21, the same day the company held a conference call with analysts to outline its 2012 results, St. Petersburg-based Raymond James & Associates upgraded its opinion of PGT's stock, from average to "Strong Buy," based on the company's 2012 numbers.

"The robust momentum seems to have continued so far in 2013, and the crucial Florida market is showing some definite signs of recovery," wrote Sam Darkatch, head of research at Raymond James.

Though PGT is the largest U.S. producer of impact-resistant windows and doors, Florida remains its key submarket, accounting for 85 percent to 90 percent of all company sales, according to the brokerage firm.

Florida building permits, the firm noted, "have climbed back to 2008 levels," posting year-over-year growth rates of 50 percent in the fourth quarter.

During its conference call with analysts, Hershberger and executive vice president and chief financial officer Jeff Jackson noted higher profit margins and sharply reduced debt. The company has also continued to buy back its shares on the open market to strengthen its stock price.

During a tour of the company's Venice plant, Hershberger explained why business is up.

"Remodeling might have gone down by 15 or 20 percent, but not the 90 percent that new construction did. So that's what really carried us through the downturn," Hershberger said.

Now, with home prices rising, consumers have regained confidence that home improvements will pay off when it comes time to sell. Moreover, an upturn in new home construction in the state is expected to further bolster sales.

"You're seeing a lot of national builders who are buying big pieces of construction-ready property," Hershberger said of permitted land fashioned by developers during the residential boom years that has sat idle of late.

Retailers, too, are seeing PGT sales growth firsthand.

At Universal Window Solutions' 10,000-square-foot showroom in Southern Manatee County, PGT products account for a fifth of the displays, co-owner Bob Smith said.

"In our market, there is a love affair between PGT and the building community. And it is justly deserved," Smith said. "The builders have come to trust the brand. The dealer has a fondness for it because the builders like it, and because PGT delivers on time, and correctly."

Smith, who installs doors and windows for well-known builders such as Neal Communities and John Cannon Homes, said the vast majority of his PGT sales are for high-end, single-family residential remodels, which account for about half of Universal's overall business.

"PGT kept going with the research and development," Smith said. "So they were not only one of the pioneers in the category, they've continued to push the category forward."

Hershberger believes PGT is only at the beginning of a new surge in demand.

"We have been through it a number of times since we have been in business, where building picks up, then slows down, then picks up, then slows down," he said.

"We are really early in the pickup of the cycle," Hershberger said. "It will be '15 or '16 at least before we re really heading up the hill at a decent pace."

A sandwich approach

PGT's evolution began in the 1980s with a vinyl porch enclosure company called Vinyl-Tech.

Though the company dominated the vinyl porch business, Hershberger and his executives decided to focus on impact-resistant windows and doors after Hurricane Andrew showed what a 150 mph wind could do to a South Florida home.

As Miami and Dade County officials went through the grueling process of toughening their building codes, they asked PGT and other industry representatives for input. For two years, someone from PGT attended weekly meetings in Dade to help fashion solutions.

"Our view was, windows and doors should withstand basically the same kind of impact and pressure that walls do," Hershberger said.

The company ended up adopting an approach long used to make car and truck windshields, creating a "sandwich" of two layers of glass with clear vinyl in between.

To prove its products could stand up to projectiles, PGT adapted tests designed by Texas Tech University and Missouri University of Science and Technology.

Eventually, PGT employees in Venice built their own cannon to shoot pieces of two-by-four lumber -- some weighing as much as nine pounds -- at vinyl-reinforced windows.

"At the time, we were in downtown Venice," Hershberger recalled. "And we brought everybody over here, and showed them that we could do it. We really just leveraged it."

The technology worked, and today PGT is a NASDAQ stock with a place on the Russell 2000 stock index.

Though its 57 million shares of outstanding stock trade on the open market for just around $5, PGT boasts a total market capitalization of $275 million.

Built to order

There is no inventory of doors and windows just sitting around at PGT's plant.

Instead, each individual order that comes in from contractors and home builders is built to order, taking anywhere from a few days to a few weeks.

The custom manufacturing means PGT can turn out fixed panes of framed glass in a wide variety of shapes.

Two main factory floors are on the company's Venice campus: One where glass is tempered and laminated and an even bigger one where hundreds of workers put the glass -- or in some cases vinyl -- into the right frames.

The bigger of the two plants also is where the company makes its EZ-Breeze vinyl window line.

In addition to the uptick in the economy, the Venice operation has gotten busier as a result of a company consolidation.

In 2011, PGT closed a plant it had set up in Salisbury, N.C., which resulted in hiring 300 employees in Venice last year.

But Hershberger hints that if growth continues on a steady trajectory, PGT has a lot of room to grow. He notes that, even with 1,100 workers, the main Venice plant operates only a shift and another half-shift, and those only run five days a week.

"So if you want to go around the clock and work seven days a week, which we have done in the past, I would say, based on that, we are running at 40 percent, maybe, of capacity," Hershberger said.

"As such, we've got room to grow a lot."

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